"Good Idea or Just 'Bad' Politics?" by Mark S. Gaunya

Two years ago, the MA Healthcare Reform Law went into effect with the admirable goal of insuring the uninsured – and it asks everyone to participate – the government, insurers, providers, employers and individuals.

Is it working?

According to the latest press release by the Commonwealth Connector – the government authority responsible for administering the new law – there are 340,000 newly insure MA residents, giving the Commonwealth one of the lowest uninsured rates across the nation – and some say a universal healthcare model for the rest of the country.

What’s wrong?

With all the newly insured people coming into the system so rapidly, we are having trouble finding enough doctors to treat them and – we are having trouble finding the money to pay for it. In fact, some estimates show that the new law is under-funded by as much as $150-$200 million.

What does the Governor propose?

Last week, Governor Patrick issued a proposal asking businesses, insurers and hospitals to contribute about $100 million to fund the shortfall – and according to some new polls, consumers are supportive of his idea because they think “others” need to step up and pay “their share” – suggesting that recent increases in co-payments and deductibles prove consumers are already doing “their part.”

What are the specifics for the Governor’s proposal?

The Governor proposes raising $100 million in three ways:

1. Changing the “or” test for employers to “and” ($33 million) – if employers fail, they must pay a $295 annual assessment for each employer
 Specifically: employers with more than 10 employees must pay at least 33% of worker’s premiums within their first 90 days “or” have at least 25% of their worker’s covered by an employer plan
2. Tax health insurance company reserves ($33 million) – these monies are used to pay claims and a certain amount must be kept on hand by each insurer to make sure those claims can be paid
3. Tax hospitals ($28 million)

What’s wrong with this plan?

The problem with the Governor’s plan is it’s a HIDDEN TAX on consumers – and it doesn’t fix a thing! Why?

The government, insurers, providers, employers and consumers all play an important role in the healthcare equation…let’s take a closer look.

The MA state government collects a big check from the federal government every year (last year, almost $4 billion) to pay for Medicare and Medicaid healthcare expenses. The problem – the government does not pay its fair share – they pay about $.80 for what costs $1.00 for doctors and hospitals to deliver in the form of care for me and you.

The big insurers in MA (BCBS, Harvard Pilgrim, Tufts and Fallon) are all non-profit. They make about 1-2% profit margin on every premium dollar they collect from us (employers and employees) and put those profits into the bank (reserves) to pay claims. Insurers negotiate contracts with the government, doctors and hospitals to deliver care to you and me (their members). Because the government only pays 80% of what it should, doctors and hospitals charge insurers about $1.20 to make up for the government’s shortfall.

The doctors and hospitals also negotiate contracts with the government and insurers. As we already discussed, they charge insurers more than the actual cost of care to make up for what the government isn’t paying (see estimated figures above).

Employers sponsor health insurance for their employees. Most work with brokers and consultants to find the best plan for the least amount of money and on average – employers pay about 75% - 80% of the cost for their workers.

Employees (consumers) pay for about 20% - 25% of the health insurance premium and when they use their health plan – they pay co-payments and deductibles as well.

How can it be a hidden tax when the Governor’s plan calls for everyone else to pay?

When you understand who is involved in healthcare and the role everyone plays – it becomes clearer to see the impact:

1. Insurers – taxing reserve accounts will lower “money in the bank” (reserves) and require the insurers to increase health insurance premiums to replace them
2. Hospitals – faced with already tight budgets, hospitals will be forced to demand more money from insurers to deliver care and insurers will have to give it to them or risk not being able to offer their members access to “my doctor” “my hospital”
3. Employers – changing the test from “or” to “and” will increase assessments (fines) which means employers will have less money to hire, give raises, pay for benefits, etc.
4. Consumers – will pay higher insurance premiums because employers can’t afford to pay the premium increases insurers will demand

Where do we go from here?

We need to ask the EVERYONE to be more prudent with the way they spend their money – let’s see what that looks like:

1. Government – we need the government to pay its fair share and manage OUR money more wisely…why is that such a foreign concept? Spend less than they take in to give us a balanced budget and money to fund greater access to care and to help lower what doctors and hospitals need to ask insurers for
2. Insurers – we need insurers to continue to find ways to reduce their administrative expenses (now about $.10 on every $1) and help members get the right care, at the right time and in the right place and teach them how to live a healthier lifestyle so they need less care
3. Hospitals/Doctors – we need our providers to also find ways to reduce their administrative expenses (now about $.25 on every $1) and helps their patients get the right care, at the right time and in the right place and teach them how to live a healthier lifestyle so they need less care (sound familiar? the word partnership comes to mind)
4. Consumers – WE need to understand that healthcare is expensive and that relative to the rest of the country, we are NOT paying more. In fact, the Boston area has the best healthcare in the country and WE really don’t pay as much as others do. WE need to demand accountability from everyone in this “food chain” as well as ourselves…it’s simply the right thing to do!

In the end, asking employers, insurers and hospitals/doctors to pay more taxes to pay for our new healthcare law is just another way of taxing us – it’s “bad” politics and a hidden tax…so hold onto your wallets!Mark S. Gaunya
Principal
Borislow Insurance
Board Member of MassAHU